Fannie Mae Predicts Strong Economy Into 2018

Fannie Mae is predicting a robust economic growth for this year, despite a projected slowdown during the first quarter.

 

According to the Fannie Mae Economic and Strategic Research (ESR) Group’s March 2018 Economic and Housing Outlook, the full-year 2018 forecast of real GDP growth by one-tenth to 2.8 percent, while the full-year 2019 forecast by two-tenths to 2.5 percent. Fannie Mae also downgraded its first quarter forecast from 2.7 percent to 2.2 percent, blaming the drop on slowdowns in housing activity and business investment plus what it described as “lackluster consumer spending.”

 

Looking forward, the ESR Group raised potential red flags—most notably, “including the potential for aggressive monetary tightening from the Fed and a further escalation of trade tensions following the recent tariffs placed on steel and aluminum imports”—and it also predicted a rate hike will occur during this week’s meeting of the central bank’s Federal Open Market Committee meeting, with two more rate hikes later in the year.

 

“We’re nearly a quarter of the way through 2018 and, as anticipated, the interplay between fiscal and monetary policy continues to frame the economic landscape,” said Fannie Mae Chief Economist Doug Duncan. “While we expect the economy to shift temporarily into a lower gear in the first quarter, the pace of growth should accelerate through the remainder of this year and into the next. Beyond the obvious downside risks, the economy appears poised to build on a foundation of strong consumer spending and a historically healthy labor market following the recent passage of the discretionary spending bill on top of tax reform.”

 

On the housing front, Duncan added that “home sales got off to a rough start in 2018, bottle-necked by the persistent challenges of the inventory shortage.” Nonetheless, he insisted that “strong home price appreciation continues to come as welcome news to existing homeowners.”

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